April 23, 2013

Great Bank Heist!

During the period leading up to the collapse of the economy that reached a crescendo in the fall of 2008, we got trapped into thinking bad credit decisions could be overcome with good collateral. Those of us tied to the mortgage industry saw the poor loan underwriting that added , or maybe even created, the housing bubble.

The mortgage broker did not look beyond his own wallet. The loan he originated smelled but if the loan servicer that he sold the loan to was willing to pay a good price, what did he care.

The loan servicer had to wear a gas mask to protect himself from the stench of the loan he just purchased, but if Goldman Sachs was willing to purchase it from him at a good price, what did he care. The loan servicer unloaded the risk and made a good profit.
Goldman did not care about the smell of the loan because they were able to buy an investment grade rating from the rating agencies and sell the loans to their clients including wealthy individuals, pension funds and financial institutions around the world. In the process they made a lot of money and were bailed out by our politicians in Washington.

The Washington Politicians did not care because they received big campaign contributions from all entities involved in the transaction and they figured the voter was too stupid to figure out that they were the ones stuck with the resulting calamity.

So far it appears Wall Street and the politicians were right. Their heist worked and we are stuck with the bill.

1 comment:

You have it down pretty good but forgot one very important aspect of the scene at the time..property "investors" that were foaming at the mouth to buy properties across the US to jump on the bandwagon of "value increase"! These people (some who had never invested in properties in their lives) jumped on their "teachers" bandwagon and when the bottom fell out they were left holding the bags(while their "teachers" ran to the bank)..but as you know it wasn't just them. It was every tom, dick and harry that could sign their name and thought they would get rich with the fraud they committed (remember NINA?) A nation of liars..a nation of greed..a nation of fraud...and there you have the reason why we cry for our poor pocketbooks that have been emptied by ourselves!!!